Democrats feud over California pension reform measure

By Tim Reid

(Reuters) - A campaign for a ballot initiative that would cut California's public pension benefits and could become a model for other states has stalled as Democrats battle each other in America's largest state.

Chuck Reed, the Democratic mayor of San Jose, may be forced to end his campaign to put a sweeping pension reform measure on a statewide ballot in November after Kamala Harris, California's attorney general and fellow Democrat, chose what Reed and his backers say is biased, union-friendly language for the voter initiative.

Reed and proponents of the measure, which aims to give California mayors the freedom to renegotiate pension deals already awarded to public workers, say they will sue Harris over the wording her office chose for the ballot initiative.

A lawsuit could come as early as this week, said Dave Low, a spokesman for Reed.

Harris' office said the title and summary were "accurate, and we stand by it."

Under California law, the attorney general is tasked with writing the title and summary for ballot measures, a practice that in the past has produced wording in some measures that was biased or too complex for a voter to decipher.

Reed is particularly upset by the ballot summary's first sentence, which states that his measure "eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees, including teachers, nurses, and peace officers, for future work performed."

In an interview with Reuters, Reed called the wording chosen by Harris as "not impartial and not true."

Reed says the use of "nurses, teachers and peace workers" to describe public employees is loaded and unfair. He also says the language implies he wants to cut benefits already accrued, which his measure will not touch.

Reed conceded that the lawsuit will likely make a campaign for the ballot initiative unlikely for this November's statewide votes, but he hoped to resurrect the issue for the 2016 elections.

Reed's statewide measure, which is backed by two other Democratic mayors and one Republican mayor in California, would amend California's state Constitution to allow pension benefits for current workers to be altered, an effort that has enraged the state's unions.

Pension spending has become a growing concern in many parts of the United States as retiree costs are often the biggest part of city and state budgets. Pension costs are prominent issues in the municipal bankruptcy cases of Detroit and San Bernardino.

California's courts have interpreted the state Constitution to mean that a worker's pension benefits, once agreed, can never be cut.

CUTTING FUTURE BENEFITS

Reed says he does not want to touch benefits already earned but does want to give mayors the ability to renegotiate pension formulas so future benefits to current workers can be cut.

The fight over pensions in California increasingly pits Democratic mayors, who say they have to balance budgets and safeguard basic public services, against organized labor, which is dominated by Democratic membership and which has many elected allies on city councils.

Reed succeeded in getting 70 percent of voters in San Jose - California's third-largest city - to pass a pension reform measure in 2012. That initiative is now being litigated in state courts after union opposition.

Reed's statewide initiative would allow cities to change generous deals awarded across California in the 1990s before the financial crash. Those deals allowed most police, for example, to retire as early as age 50 on a lifetime pension, based on 90 percent of their final year's salary.

Jeffrey Brown, a professor of finance at the University of Illinois - a state with severe unfunded pension obligations - said eight other U.S. states, including Illinois, have similar provisions making it almost impossible to change pension formulas for current workers.

"California is a big state," he said. "Many states and localities across the country are dealing with difficult fiscal situations. If this measure is successfully pursued in California, it will create a big public policy precedent that many other states will likely want to follow."

(Corrects number of Democratic mayors backing reform measure from four to two in 11th paragraph)